Koi herpesvirus (KHV) is the aetiological agent of an emerging disease (KHVD) associated with mass mortalities in koi and common carp (Cypinius carpio L.) and reported from at least 30 countries. It has been suggested that the global trade in sub-clinically infected fish is responsible for the rapid spread of KHVD. Despite the importance of this virus to aquaculture, little is known about its life cycle, particularly whether persistence of KHV the result of a latent non-productive infection, and if so, what are the mechanisms of establishment of and reactivation from latency? To facilitate in vivo and in vitro studies, KHV was isolated from koi and common carp in Indonesia and initial characterization of the isolates was determined. Clinical signs, histopathology and virion morphology were shown to be similar to those of isolates from other countries. Phylogenetic analyses using the thymidine kinase gene amplified from each isolate and from carp tissue samples collected from KHVD outbreaks throughout Indonesia indicated that the Indonesian isolates were more closely related to the Asian than the European KHV lineage. Sequence analysis of two other variable regions between ORF29 and ORF31 (marker I) and near the start of ORF 133 (marker II) indicated that all Indonesian isolates displayed a marker I allele (I++) previously identified only in isolates of the Asian lineage. However, in the marker II region, all Indonesian isolates displayed the II- allele, which has been reported previously only amongst isolates of the European lineage, and 9 of these displayed a mixed genotype (II+II-). The I++II- genotype has not been reported previously and appears to represent a new intermediate lineage that may have emerged in Indonesia. To assist analysis and interpretation of other experiments, particularly the experimental model for KHV latency in carp, assays were developed for KHV DNA, mRNA, protein, and infectious virions using real-time quantitative PCR (qPCR), qRT-PCR, immunohistochemistry and virus isolation in cell culture coupled with immunocytochemistry, respectively. Once the virus was characterized and the detection systems were developed, an experimental model of KHV infection in carp was established to demonstrate for the first time that KHV persistence in survivor fish has the characteristics of a latent, non-productive infection, with the capacity to reactivate under certain conditions. During acute infection, which occurred when fish were maintained at 22oC, extensive viral gene expression occurred, infectious virus particles were produced, and these were associated with tissue damage and clinical disease. Fish maintained at a lower temperature (11oC) retained viral DNA but showed greatly restricted viral gene expression. Furthermore, productive replication could be re-initiated following an increase in water temperature from 11oC to 22oC. This recrudescent infection resulted in the death of 45% of these fish. These findings are consistent with the establishment of a reactivatable latent infection. Shedding of the reactivated virus resulted in a 75% mortality rate in co-habitating naïve fish. Early (β kinetics) and late (γ kinetics) genes were highly expressed during the acute phase, but not during the latent phase, further supporting the existence of KHV latency. To our knowledge, this is the first report on the KHV gene expression in fish. This study also provides the first evidence of KHV infection in dorsal root ganglia. To obtain insights into the mechanism of KHV latency, virus-encoded interleukin-10 (IL-10) homolog was investigated. The 624 bp coding region of KHV ORF 134 was shown to transcribe a spliced transcript encoding a 179 aa IL-10 homolog (khvIL-10). Pair-wise sequence alignment indicated that khvIL-10 shares 25% identity with carp IL-10, 22-24% identity with mammalian (including primate) IL-10s and 19.1 % identity with European eel herpesvirus IL-10 (ahvIL-10); however, key structural features are preserved and homology modelling indicated that the khvIL-10 3D structure is similar to human and carp IL-10s. Phylogenetic analysis indicated that khvIL-10 is more divergent from carp and other available piscine IL-10 sequences than is ahvIL-10 and so appears to have diverged more rapidly following capture from an ancient fish progenitor. A phylogeny inferred from host IL-10s and viral IL-10s indicated that khvIL-10 and ahvIl-10, as well as poxvirus IL-10s and mammalian herpesvirus IL-10s, were captured from their host and identified 8 independent IL-10 capture events that have occurred during the evolutionary history of poxviruses and herpesviruses. In KHV-infected fish, khvIL-10 transcripts were observed to be highly expressed during the acute and reactivation phases but at a very low level during latency. The khvIL-10 expression patterns suggest that its function may be important for KHV survival at each stage of infection. This is the first report of the characteristics of viral IL-10 gene in the Alloherpesviridae.